How to Compare Cheap Health Insurance

From a financial standpoint, choosing the right health insurance policy should not mean simply identifying the cheapest premium, but rather balancing the policy cost to the amount you may claim.

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* The price shown is per week and applies to a {LIFESTAGE} living in VIC with a $500 excess. It excludes LHC loading and includes a Base Tier Government Rebate

Too many Australians opt for the cheapest health insurance policy but end up paying more over the year. Often a slightly cheaper policy may have lower claim benefits, meaning when you see a dentist or get a new pair of glasses your out-of-pocket expense may be greater overall.

It is worth understanding that the government subsidies health insurance policies by up to 30% depending on your income. This means that the majority of Australians are receiving a 30% discount. This is why higher health insurance policy levels can actually leave you ahead financially over the year after claims.

Don't Get Confused Between Hospital & Extras Cover!

Make sure that when you compare health insurance you treat hospital and extras cover separately.

Hospital Cover

This will cover you if you need hospital treatment. There are a few key questions to address when comparing hospital cover.

Do you mind sharing a room?
The very cheap health insurance policies will only treat you in public hospitals and may only offer shared accommodation options. If you do not like the idea of sharing a room with someone else, a budget option may not be for you!

What procedures might you need?
Cheap hospital cover policies may also restrict the procedures you are and are not covered for, and the options you have when you do have a treatment. For example, Frank's cheapest health insurance option does not cover Gastric banding, unlike some of their premium products. If you anticipate needing treatments that are not covered in the basic included services, you should consider spending a bit more to ensure you are covered.

What out of pocket/co-payments will occur?
Cheaper health insurance may require co-payments per night of your hospital stay, or may have out-of-pocket expenses for particular treatments. These often will be significantly higher for a cheap health insurance policy compared to more comprehensive covers. If you do not want to risk these fees, consider a more expensive policy and compare providers.

Overall, top-tier health insurance policies obviously cost a premium but will cover you for most services and treatments with minimal out-of-pocket expenses. You should ensure your policy is tailored to all your needs, eliminating unnecessary coverage for things such as pregnancy if you do not plan on having children in the near future. Other options such as implementing an excess can also save you money if it is unlikely you will be needing hospital care in the next 12 months.

Extras Cover

This will cover you for ancillary medical services such as dentistry, optical and physio. Before committing to the cheapest extras cover, consider the following points.

How often would you use these medical services?
Do you see a dentist twice a year? Do you get a new pair of glasses or prescription sunglasses annually? Are you likely to require physiotherapy over the next 12 months? Many Australians will answer Yes to at least one of these questions, making extras cover totally worthwhile. Like hospital cover, it is important to align your anticipated requirements with the services covered by the extras policy.

How much are you likely to claim on extras?
All extra policies have annual limits. A cheap health insurance policy will in most cases have a lower annual limit than a premium cover. For example, if you are likely to need a lot of dental work in the near future, you should find a more comprehensive extras cover that has a higher annual limit.

What is your break-even point?
Most of the cheapest health insurance policies will give you 50% back on extras, and increase in price as the refund percentage increases. For example, if you increase the amount you get back from 50% to 80% the premium price may increase by 50%. Ideally you should be able to balance the amount you expect to pay over the next year in extras with the likely savings from purchasing a more comprehensive policy. Do not forget to factor in elements such as ambulance cover which can cost thousands if you are not covered!

Consider your current status

When choosing hospital and extras cover it is important to consider your needs now, and for the near future. If you are single with no plans of having children, some policies will not be directly be applicable to you. Similarly mature couples with no plans of having additional children will see no need for pregnancy or IVF services. However, at this age coverage for more common conditions (such as hip replacements or cataracts) becomes more necessary.

There are six classifications of private health memberships, each with its own set of rules and conditions. These are: (1) Single, (2) Couples, (3) Family or adults with dependent children, (4) Single Parent Family or one adult with dependent children, (4) Single Parent Family Extension or one adult with adult dependents or children, (5) Family Extension or two adults with adult dependents or children, and (6) Children only.

If you have plans to travel abroad, you should also look for conditions in your policy where you can suspend your membership and payments. Once you've returned you will still qualify for the same benefits and will not have to renew any waiting periods you have accumulated previously.

Look For Introductory Discounts!

Many private health insurers will offer discounts if you pay your premiums in advance, normally ranging from no waiting periods on on some extras to a free month of cover. If you are able to pay in advance, you can also avoid rate increases that may occur within the policy period. Monthly premiums are bound to change over time due to rising health costs and new government regulations. Thus, it would be wise to secure a locked-in rate for your policy if possible.

You can also look for special offers or price-matching offers, where insurance companies will try to beat competitor rates. Employers often partner with private health insurance companies as part of the company's benefits package, meaning a discounted monthly premium for staff which is automatically deducted from your salary.

Types of private health funds

Many private health insurers are for-profit enterprises, while others are non-profit organisations. The latter typically uses its earnings to pass on savings to its members, to offset the need to impose higher premiums as operating costs rise.

Some health funds may also offer a larger network of partnered private hospitals across many states. There are insurers who only operate in specific areas. If you live and work in more than one place, this should be part of your decision making process. Health costs vary across different states and hospitals, and you may be caught unaware of additional costs if you end up in a hospital that does not have an agreement with your chosen health fund.

Health insurance companies are also classified as either open or restricted memberships. Open funds are available to the general public, while restricted funds service only a specific demographic such as teachers and union workers. The latter has been known to offer additional benefits and services that are tailored to suit specific industries. These are also known to offer better deals compared to open funds.

The best way to get the right private health insurance at the right cost is to compare all the types of policies that are available and relevant to you. Do not be tempted into committing to the policy with the lowest monthly rates. Know exactly what your policy offers and check the fine print thoroughly to determine your options. It may be to your advantage to pay higher costs up front to save more when you make a claim in the future, get better benefits or enjoy discounts and special offers not available with other insurance providers.

Join Frank on combined hospital and extras cover online from June 22 – 30 and get 6 weeks free*.

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